Impact of Financial Globalization on Financial Development in Developed and Developing Countries

Over a period of more than three decades from 1982 to 2019, this study examines the impact of financial globalization on financial development, taking into account differences between developed and developing countries. It also examines sub-indices of financial-development and provides a comprehensive perspective on the topic. The analyses in this study use the Durbin-Hausman panel cointegration test, which provides more precise and less biased results for panel data with a large number of units and the augmented mean group (AMG) estimator, which combines the advantages of both fixed-effects and random-effects estimators to provide more efficient and robust forecasts. Empirical findings reveal a long-run association between financial development and financial globalization across both developed and developing economies. Notably, while the coefficients of this relationship are consistently positive in both groups, statistical significance is observed only in developed countries. This result implies that the positive effect of financial globalization on financial development is more pronounced in developed countries. It also points to the importance of market participants in developed and developing countries making financial decisions in line with their countries' level of development.